Rittenhouse condo high-rise stages turnaround

By Alan J. Heavens, Inquirer Real Estate Writer

Posted: August 26, 2013

Just 22 months after its unsold units went to sheriff's sale, 10 Rittenhouse Square, the Robert A.M. Stern-designed luxury high-rise at 18th and Walnut Streets, is only 11 pricey condos away from being sold out.

That's without a value-crushing auction, and with prices on the remaining units cracking the $1,000-a-square-foot barrier - understandable, given that they are on coveted floors with spectacular views.

There are many reasons for what "seems like a remarkable turnaround," as economist Kevin Gillen, senior research fellow at the University of Pennsylvania's Fels Institute of Government, described it - a building conceived in boom times but born as the economic bust gripped the city real estate market.

Chief among those reasons, local real estate observers said, are the recovering economy and Carl Dranoff.

Once 10 Rittenhouse's senior lender, iStar Financial, "stepped in and put Dranoff in place" there, people began feeling confident about buying there, said Center City condo developer Allan Domb.

Said Gillen: "Part of [it] is the property's fundamentals being sound; part of it is the general recovery in the real estate market and the economy, but a significant part of it has to be given to Dranoff."

Tom Scannapieco, who developed 1706 Rittenhouse Square Street, 10 Rittenhouse's chief competitor in the luxury condo market, said the sales frenzy in Center City "reflects strength at the high end of the market."

Noting that his building is down to two available units and 10 Rittenhouse is at 11, "I think Center City can definitely handle another condominium project at this time if it is positioned at the high end of the market," Scannapieco said.

Added Domb: "No new construction was occurring right on Rittenhouse Square, and there is not a lot of high-end inventory left."

What's left at 10 Rittenhouse ranges from the Rittenhouse Club unit, priced at $15 million, to a 29th-floor penthouse at $2.1 million, said Marianne Harris, Dranoff's director of sales, leasing, and marketing. The two 28th-floor penthouses - one is 4,932 square feet, the other 5,570 - are listed for $5,975,000 each, she said.

Though 10 Rittenhouse was conceived and built by others, it was Dranoff to whom iStar Financial turned in November 2011, after wresting control of the building and nearly 100 unsold units in a lengthy tug of war with the developer, ARC Wheeler, and the Delaware Valley Real Estate Investment Fund, which provided a mezzanine loan.

Before iStar took control, just 39 of the 143 units had sold, Dranoff said. Because of lengthy legal disputes involving three historic buildings on 18th Street, pre-sales of 41 other units disappeared.

Dranoff served as receiver for two months until iStar acquired the unsold units at sheriff's sale in January 2012, agreeing to do it, he said, when iStar assured him there would be no auction and supported "a strategy of protected value."

"Once a building's price is cut, it almost never comes back," Dranoff said.

"We have an infrastructure to manage such projects, as well as oversee continued construction, development, and marketing," Tucker said, adding that iStar brings into the process "talented local managers and developers."

"Carl was essential in translating our vision of 10 Rittenhouse as the 15 Central Park West of Philadelphia, another Stern building," Tucker said.

Yet even she was surprised by the speed of the building's turnaround. "We never expected to be 90 percent sold before the amenities floor was completed," she said, referring to the recently completely 13,000-square-foot space.

Irene Eizen moved with husband Bernard to a 23d-floor unit in December. When she first happened to stopped by the 10 Rittenhouse lobby for a look, she said, she "was treated as if I'd said I wanted to buy."

The Eizens - she teaches at Temple, he is a lawyer - had lived in the Murano since downsizing from Abington in 2007 and hadn't been planning to pick up stakes again.

"But I went home and told my husband that we should move there," she said. He was surprised, to say the least, but agreed.

"We have a fabulous unit right on Rittenhouse Square in the heart of the city," Eizen said.

The Murano was the first new high-rise locally to use an auction to set post-housing-boom values. And though she "loved our apartment there," Eizen acknowledged that everyone who bought there originally was "nervous" about it.

In light of the Murano auction and others, Dranoff sent Harris to every real estate office in Center City for the first six months he was managing the building, to "assure them that prices would not be lowered."

"We had to establish value at the outset," he said.

Still, brokers tried, making offers $1 million below asking, Dranoff said, noting, "People got angry, but we had to hold the line."

Steve Pearson sold his Society Hill house in 2010 and rented for two years.

"I'd seen 10 Rittenhouse the first time before [the legal wrangling] and I liked the quality of the building, but I didn't buy because I thought the prices were too high," he said.

Pearson believed there would be an auction, but in the summer of 2012, as the sales pace heated up and he feared he wouldn't get a balcony on Rittenhouse Square, he opted to buy.

"I'm a businessman, so I tried to negotiate, but after one counteroffer, they wouldn't budge," Pearson said.

Dranoff has "kept values in line," he said, and, "after all, this is about people being in for the long haul."